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Performance Measurement

The document discusses performance measurement systems. It defines performance measurement systems as tools that organizations use to quantitatively and qualitatively assess intangible performance elements. It contrasts traditional, financially-focused performance measures with non-traditional measures that focus on factors like quality and flexibility. Good performance measures are relevant, timely, actionable, include both financial and non-financial metrics, and help communicate organizational success. The document also discusses the balanced scorecard model, which evaluates performance across learning & growth, business processes, customer perspectives, and financial data.

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Rohan Chauhan
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116 views

Performance Measurement

The document discusses performance measurement systems. It defines performance measurement systems as tools that organizations use to quantitatively and qualitatively assess intangible performance elements. It contrasts traditional, financially-focused performance measures with non-traditional measures that focus on factors like quality and flexibility. Good performance measures are relevant, timely, actionable, include both financial and non-financial metrics, and help communicate organizational success. The document also discusses the balanced scorecard model, which evaluates performance across learning & growth, business processes, customer perspectives, and financial data.

Uploaded by

Rohan Chauhan
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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SHRI GURU RAM RAI

UNIVERSITY
PATEL NAGAR DEHRADUN-248001

{Academic year 2021-23}

Department- Management

Name of assignment- Performance measurement system

SUBMITTED BY- SUBMITTED TO-

Rohan chauhan Miss Divya verma

(CLASS- MBA 2nd sem)

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Performance measurement system

INTRODUCTION

With the advent of globalization performance measurement interest highly evolved among
organizations which are increasingly seeking for tools that leads to process optimization,
efficiency and competitiveness. The top management became more involved as well operating
levels. Organization strategies are now designed to promote its deployment in measures that will
lead to actions for targets achievement.
There are several academic literatures on the topic of performance measurement. Some
authors give more emphasis to the development of performance measurement system along the
century, others focus in the difference between the financial and non-financial attributes and
others focus on a specific stage of the performance measurement system. There are articles which
focus specifically on structural models emerged during the measurement system evolution as the
famous Balanced Scorecard (Kaplan 1987).

PERFORMANCE MEASUREMENT SYSTEMS

Performance measurement systems are characterized as strategic expert systems by which


organizations observe and measure their intangible performance elements in the form of
qualitative and quantitative assessment as stated in the article of Fried (2010).
According to Gimbert et al. (2010) performance measurement system is a brief and precise
set of measures (financial or non-financial) that supports the decision-making process of an
organization by collecting, processing and analyzing quantified data of performance information.

Traditional and Non-Traditional Performance Measurement

According to academic literature performance measurement had until the 80's a more traditional
approach with financial focus. From that point on, the globalization introduced a nontraditional
approach changing the strategic focus of low production costs into quality, flexibility and
delivery focus, showing that traditional concepts were very limited and opening to new models
(Ghalayini and Noble, 1996).
Based on non-traditional performance measures features - which is the current recommended
model – organizations may be guided by aspects that make the process more productive and
effective: directed to all employees; simple and easy to use; accurate; always revised; supporting
continuous improvement; etc
It is important to analyze the organization approach and its objectives to build a PMS.

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Traditional performance measures Non-traditional performance measures
Based on outdated traditional accounting system Based on company strategy
Mainly financial measures Mainly non-financial measures
Intended for top and senior managers Intended for all employees
Late metrics (weekly or monthly) On-time metrics (hourly, or daily)
Difficult, confusing and misleading Simple, accurate and easy to use
Lead to employee frustration Lead to employee satisfaction
Neglected at the shop floor Frequently used at the shop floor
Have a fixed format Have no fixed format (depends on needs)
Do not vary between locations Vary between locations
Do not change over time Change over time as the need changes
Intended mainly for monitoring performance Intended to improve performance
Not applicable for JIT, TQM, RPR, OPT, etc. Applicable
Hinders continuous improvement Support continuous improvement

Characteristics of Good Performance Measures

 Good performance measures allow for comparisons to be made to enable performance


improvements.
 They reflect on the overall organizational goals and strategies.
 They are relevant.
 They are timely.
 They are actionable.
 They are both financial and non-financial.
 They allow easier communication of the strategy and help people understand the definition of
organizational success.

Advantages of performance measurement

 It can increase the productivity of individuals and teams.


 It can identify under-performing individuals and teams.
 It can improve communication.
  It provides the opportunity to recognize top performers.
  It provides a clear chain of command.
 It can lead to decreased levels of output.
  It can make communication difficult.

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 It can lead to a lack of commitment.

Balanced Scorecard (BSC)

The term balanced scorecard (BSC) refers to a strategic management performance metric used


to identify and improve various internal business functions and their resulting external
outcomes. Used to measure and provide feedback to organizations, balanced scorecards are
common among companies in the United States, the United Kingdom, Japan, and Europe. Data
collection is crucial to providing quantitative results as managers and executives gather and
interpret the information. Company personnel can use this information to make better decisions
for the future of their organizations.

Characteristics of the Balanced Scorecard Model (BSC)

1. Learning and growth are analyzed through the investigation of training and knowledge
resources. This first leg handles how well information is captured and how effectively
employees use that information to convert it to a competitive advantage within the
industry.
2. Business processes are evaluated by investigating how well products are manufactured.
Operational management is analyzed to track any gaps, delays, bottlenecks, shortages, or
waste.
3. Customer perspectives are collected to gauge customer satisfaction with the quality,
price, and availability of products or services. Customers provide feedback about their
satisfaction with current products.
4. Financial data, such as sales, expenditures, and income are used to understand financial
performance. These financial metrics may include dollar amounts, financial ratios,
budget variances, or income targets.

Advantages of a balanced scorecard

1. Brings structure to business strategy

2. Makes communication easier

3. Facilitates better alignment

4. Connects the individual worker to organizational goals

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